Our Models
The Equity Risk Premium (ERP)
Market-implied compensation for equity risk, updated daily using observable data and forward-looking expectations
What it is
What is this model?
The Equity Risk Premium framework infers the compensation investors require for holding equities over risk-free assets by solving a multi-stage valuation identity that links observed market prices to forward-looking cash flow and growth assumptions.
The model builds on the conceptual foundations developed by Prof. Aswath Damodaran, refined to support a more responsive, data-rich implementation.
What the model does
Calculates a market-implied cost of equity by solving a present-value identity with forward-looking earnings and payout inputs.
Derives the ERP as the spread between the implied equity return and the 10-year U.S. Treasury yield.
Anchors growth and payout assumptions in observable expectations across multiple horizons.
Why It’s Relevant
Why regime awareness changes risk perception
Structural regime shifts frequently emerge before volatility-based signals become informative.
Beyond Volatility
Identifies regime shifts driven by distributional change, not volatility or moment-based signals.
Earlier Regime Insight
Detects subtle structural transitions that often emerge before traditional risk indicators react.
Governance-Ready Classification
Provides interpretable, auditable regime labels suitable for disciplined risk and oversight frameworks.
